SINGAPORE: Bhupendra Kumar Modi tends to think big, and the current financial pinch his company is facing is not stopping him. The chairman of the Indian conglomerate Spice Corp. has just unveiled a new screenless "People's Phone" that is expected to be priced at less than $20 when it is introduced in June. Modi is hoping to sell 10 million units in the first 12 months.
Despite the current credit squeeze, Modi also has big expansion plans. Cellebrum, Spice's mobile services provider, which he estimates to be worth $500 million, will list about 20 percent of its shares in the first half of the year in Singapore and Bombay. His group also aims to list Hot Stop, its mobile retail business, at the end of the year.
The Mumbai-based Spice Communications, which has just announced plans to invest $1 billion to expand its mobile phone services, is also planning to raise $500 million in 2009 and dilute its current share holdings by 20 percent to 25 percent by listing new stock in Singapore and in Dubai, thus becoming the first Indian company to sell shares in the Middle East.
After three years of early retirement, Modi came back in 2005 to the helm of the business he had founded and had left in the hands of his wife and son. The company's finances were in trouble, so the first thing he did, he said, was "regain total control."
"I told them I will run the group myself, and I can't have you around," he recalled. "I gave each of my children $20 million to build their own businesses. And I told my wife, 'You go do charity work.' "
Since then, two of his three children have rejoined the fold in Singapore, along with the ventures they founded. His son Dilip, 32, is chief operating officer of Spice Corp. One of his daughters, Divya, 26, is the group's director of investor relations.
Spice Communications, which was listed in 2007 on the Bombay Stock Exchange and has a market capitalization of $542.7 million, is still losing money. In the first nine months of 2007, it reported a net loss of 197.8 million rupees, or $4.98 million, compared with a loss of 106.34 million rupees for the same period in 2006.
But Modi said he believed things were starting to turn around. Spice Communications recently obtained licenses to operate in four more zones, which, Modi hopes, will help the company double its subscriber base to at least eight million by the end of the year.
Harit Shah, a telecommunications analyst at Angel Broking in Mumbai, cautioned that Spice must be ready for a fight. "Spice is planning to expand in newer circles where incumbent operators have been in existence for over a decade, already grabbing the low-hanging fruit," Shah said. "Given the high costs of expansion and the likely intense price competition at the start, it will take some time for them to break even."
Shah said, however, that the idea of providing a low-cost phone was "right," as most of the incremental subscriber additions were coming from rural India. "Continuously improving affordability and minimum subscription costs are the keys to effectively tapping this huge market," Shah said.
By encouraging his children to go out on their own, albeit with a nice packet of seed money, Modi is continuing a family tradition of entrepreneurship. In 1933 his father, Gujar Mal Modi, founded the Modi Group, one of the 10 largest industrial conglomerates in India until it was eventually carved up, after his death, between Modi, his brothers and cousins in 1989.
"I had a very different view of the world than my father," Modi said during a recent visit to Singapore. "We had very different visions of industry. He went into basic commodities; I wanted to go into knowledge industries."
His big break came in 1982 when, seeing the lack of automation in the Indian office market, he persuaded Xerox to set up a factory in India in a joint venture with a $300 million order he had obtained from Russia. Soon, Modi was signing deals with other multinationals like Alcatel, Samsung, Olivetti, Motorola, and Telstra.
Modi's fortunes changed in the late 1990s as the government loosened restrictions on foreigners' setting up businesses in India. As Modi's group restructured, he bought out stakes held by Olivetti and Telstra in partnerships, but sold his shares in the joint ventures with Alcatel and Xerox.